tv U.S. Senate CSPAN August 5, 2011 9:00am-12:00pm EDT
federal agencies some do good job disposing of surplus properties. one reason some agencies do a better job than others is we incentivize them not to keep underutilized property but keep the proceeds to fund operations. if you look at the way the congressional budget office scores a lease vs. purchase we incentivize agencies to lease when their purchasing. walk us through why we have this incentive. ..
>> they really need to work within the federal property council to come up with a strategy to see how the entire property portfolio is managed. while they've agreed that's a good idea to be done to rationalize the entire process, they have yet to implement such a strategy because as you know and mentioned in your opening remarks and subsequent remark, the issue having to do with the scoring is a major issue for agencies to be able to come up with the needed capital in order to take a look at a rational
process. another really important point is the necessary analysis that need to be done in order to make sure you're making the right kind of decision. while, as you mentioned earlier, generally building is a less expensive option in the long run than is leasing. it's not always the case, but you need to be the economic analysis in order to do that, and so it's important to do the 30-year net present value analysis to see how things play out over time and the scores and make the comparison to make the right decisions. look at the commercial real estate market, it makes sense to lease something where the real estate is say relatively soft compared to a boston or a new york or a chicago versus a dallas or atlanta perhaps so there's -- it's a pretty complex formula that goes into making these decisions, but in order to come up with the right decision, you really need to approach it
in a multifaceted way so at the end of the day, you're making the best call for the taxpayer. >> i'll ask you to cut through that and i appreciate what you said. what do we need to do? what needs to be done so that cvo in the future will not say almost routinely that even when it makes economic sense to purchase, we're not going to score it that way. instead, we'll score it in a way that almost mandates that agencies lease. how do we change that? >> well, it's gets into a policy area that's not so much our purview but as we discussed and noted, we made recommendations to omb they have to have a strategy in order to rationalize this process, and so agencies can make the right kind of decision of whether to lease or to build, and we've really believed that omb is the key player that needs to address
this score keeping issue, otherwise the reliance on leasing as we noted in our testimony is likely to persist. >> all right. let me turn to others on the panel. same question, same question. what i'd like for you to do is give senator brown and me and others in the committee, our colleagues in the senate, give us a to-do list, something we ought to be doing to change this -- it's really to change the culture. anybody have an idea? a good idea, a good idea. >> mr. chairman? >> go ahead. >> mr. chairman, i'll swim up river here. va's position is different than other federal agencies. 11% of our portfolio is leasing. out of 165 million square feet, we lease 12 million square feet. the rest we do ourselves. our problem is existing infrastructure, not leases.
what do we do to consolidate, what do we do to get rid of old infrastructure that's not fixed easily, and some places we don't need it. right now we have an estimate to fix our current portfolio projected for current veterans in 2020, we need $20 billion to fix our current infrastructure. that's not going to be provided for in direct appropriation. the key to unlock that problem is to tap private sector financing and working with public-private ventures or joint ventures or with localities or other notary public-profits to find uses for the repurposing the federal property, off the federal roles, put it back on the tax roles, and relieve agencies of the large costs. the biggest drag for va and other agencies is the onm cost we have to maintain facilities
that could be made more efficient and/or consolidated. it's a little bit different and the big issue about third party financing or private sector money is the other side of the score. cbo scoring treatment of the use of third party funds even if it's for non-profits or for non-government entities, it's scored like direct federal spending turning off the third party spigot of trying to utilize them to unload unneeded inventory. >> all right. yielding back to senator brown, but before i do, one of the things i may ask in the next round of questions, but i spoke earlier of a need for a comprehensive bipartisan approach on deficit reduction, along the lines of the deficit commission and my sense in listening to your testimony in earlier hearings we've had is we
need a comprehensive approach to land management, not the lease to purchase issue, but to deal with the unutilized federal properties that we do have. one of the things i want to do -- maybe at the hearing, but if not, in writing -- is get your input on what should be the components of that comprehensive approach and craft a comprehensive approach where we hair mess market values, and i appreciate your input on that. senator brown. >> thank you issue mr. chairman. mr. sullivan, to follow-up, i remember your hearing actually as a result of your testimony talking about some of the challenges with some of the prime v-8 properties to be sold, taken off your rolls, and having more money for the veterans that need our help instead of using it to keep buildings open and the like. you testified as to how sifa was
a welcomed addition to the tool kit needed in reducing unneeded assets. can you just elaborate on to how that complements your existing tools, and who role do politics have with interfering of doing your job? if you have assets to sell, how often does state or federal governments come in and put a wrench on the plan? >> senator, i'll answer that in a few ways. first way is our tool kit right now is to enhanced lease authority, and in those cases where we can develop, if you will, a win-win strategy with the local community, veterans, veteran service organizations, and the private interests in that area, we can forge out leasing in a public-private venture under that authority. we've done that in many places,
and it works where you reach consensus. where we can't reach con consensus at the local level with all the interested parties, especially local communities, the process would be a welcomed addition to be able to do with the hard-to-do properties around the countries. using both of those, places where dismg works -- something works, continue to flourish, shrink our footprint, we want to maintain, but there are places that we would be assisted in addressing those issues. there's a lot of stake holders involved in real property, and va and gsa has experienced -- stake holders have different interests, and when we can't align the interests, that's when things stop. those are constant challenges in dealing with them faced every day, and as we move down the track, there needs to be a way to deal with those interests. >> so, again, back to my final
question, i think you answered it without really wanting to say it, but what role does state or federal politicians in politics affect it? do they specifically call and/or stop your efforts when you try to do some things for the benefit of the va? >> in some cases, yes. when we don't have alignment of interests, local interests don't have the same interests va has, and in some cases that happens and comes to a grinding halt. >> very smooth. that was a good answer. very, very nice. [laughter] that's unfortunate because with senator carper -- chairman carper just asked for recommendations. i would think one of the recommendations would be to leave the politics out and do your job baseed on fact and necessity with the issues and if you make that recommendation include that frankly so we don't beat around the bush in that
regard. mr. weiss, generally in larger perspective level projects 2.7 million over ten years and it's better to purchase than lease. in the sifr legislation, it requires a net present value analysis of the lease compared to the cost of constructing new space. how important is it to provide this information to congress, do you think? >> i think it's very important, senator, because through using analysis like net present value and scoring, you can then be comparing apples to apples because this is something gsa had done previously and enables the agency or the decision makers to be able to come up with a decision based on where the dollar value is today versus what it'll be 30 years onwards
including any potential inflation returns and other factors put into the mix so we believe that a net present value analysis is certainly a key aspect of the entire current economic analysis picture in order to make these decisions. >> thank you. mr. foley, what steps do they take on behalf of the clients to achieve the best value for the taxpayer and also supporting the mission crit call requirements? >> sure. we do a couple things and present a net present value analysis, comparing the cost of building a new federal facility, renovating a facility, and the cost of leasing. we do the 30-year net analysis and evaluate the financial aspects. as i mentioned earlier, one of the key things is having a firm understanding of the requirements and we work with the agencies to understand how they may be able to adjust their requirements slightly to get a better deal for the taxpayer.
for instance, instead of having to be in one building of a particular size might drive construction of a new building or limit competition to one or two buildings that have a certain amount of space available, if they can be in two proximate buildings next to each other or on the same campus, that opens competition and drives down the cost of leasing. there's simple things we can do working with client agencies to find a way to meet their mission requirement, and leverage our stake in the real estate market to get the best value for the taxpayer. >> you noted in previous testimony that you are continually assessing your performance against other rental rates in same or similar markets through a lease cost relative to market measure. how is the gsa doing in comparison to the commercial market in various sectors? >> we continue to lease a cost below the market. end of last year somewhere around 10% below the private
sector benchmarks we were using. >> and is that geographically driver or just overall? >> based upon a geographic market and sub market. look at where we're leasing, find our comparable rental rate from the private sector in that particular market. >> i'll just defer to you, mr. chairman. >> okay. we'll have a third round, so feel free. i want -- i've been jotting down questions as y'all testified and responded to questions from senator brown and myself, and i just want to kind of walk through this list briefly if i could. one of the areas of jurisdiction that we also have is u.s. postal service. we faced a situation with the postal service could run out of cash later this year, if not this year, next year, it will create a huge economic mess in
our country. i think about 8 million jobs, depending on the mailing industry. looking hard for ways to help the postal service right itself and twitter, e-mail, facebook to be able to meet our needs, mailing needs, but do so in a way they cover their costs. there's been some discussion here today about consolidation, consolidating property and activities in ways that make sense. we do that through base alignment closure commissions and about every half dozen years. think out loud for me, for us, about how the u.s. postal service might play a role here that would enable us to kill two birds with one stone, one is meet the property needs of a number of federal agencies that have nothing to do with the postal service and yet help the postal service to better meet
its revenue obligations in order to free themselves of support from the federal government, federal taxpayers. okay. whoever wants to take a first shot at that, did right ahead. >> i'll start first. >> mr. foley. >> work with the postal service for a number of years. they are tenants in our buildings and we lease to the postal service. we have agencies located in postal service buildings. we work with them closely as they dispoe of buildings and where we have existing federal needs and we worked with them to figure out where we dispose of properties or have available underutilized properties where they can utilize that. several years ago, back as far as 1985 set up an mou allowing for a exchange of properties and fair market value of that. it's been effective, i think,
for both agencies. another area where we partner with them, mr. sullivan mentioned the enhanced lease using authorities, and we've been able to lease from them, develop properties, too specific for irs and in philadelphia and kansas city where we use a formal postal service facility, renovate that, and use their authority to create modern, efficient space for the irs, and help find a good value for the taxpayer. >> well, that's very encouraging. anyone else? that's good stuff, thank you. anybody else? >> i'm sure, senator, if the post office has sites available due to downsizing and are available, for us is is it key where it's located and where the veteran's needs are and if they could be easily adapted to deliver health care, i'm sure we would look at those and see if there's a match and take
advantage of any economies that were there. >> okay. thanks. i just ask our staffs of both democratic and republican staff to please note that. i think there's a scenario to help the postal service help themselves, and if we are smart about it, help federal agencies get better value for their spaces. anybody else have a comment before i ask another question? okay. we have had discussion, delegation of lease authority, some instances where it's done well and some instances, most certainly scc was not done well. you used to work at capitalone; correct? >> that's correct. >> you had employees who were, i'll use the term "guilty" of kind of a gross bad judgment in terms of preparing the fcc for for -- for meeting its space
needs going forward. how would those employees be dealt with? what kind of accountability would have been brought to them? >> i think in a relatively similar manner. obviously, there's not the same level of rules and regulations that the federal government has as it relates to their employment practices, but there's rules and procedures that apply, and so employees in a situation like that would be, you know, they would have some available of due process, and it wouldn't be an arbitrary dismiss sal if you will, but there would be an investigation, and upon result of that investigation, appropriate disciplinary action would be taken. >> i hope that appropriate disciplinary action would be taken and things that really -- it's when we have bad behavior, grossly bad behavior on the part of federal employees or others
who are using contractors, and there's just little, if any, accountability, and that's not right. i would just ask you keep that in mind. we want to be fair, but also want tough love. it's a tough love situation. i think we need to be tough, provide an example. at the beginning, i think, of your testimony, mr. sullivan, i think you may have -- there were three questions the va asks. could you say the questions again for us, please? i looked through your testimony, and i didn't see them. >> sure. when we make real property decisions whether to renovate it, sell it, or whatever, how will that decision affect veteran and veteran's families, number one. we don't do anything to negatively impact them. second priority is to be sure that decision improves the efficiency and cost effectiveness of the va operations whether it's
consolidating, building a new building or buying a piece of property. the third is we want to be a good neighbor. we're located in 165 communities around this country with major presences, and sometimes we are the presence in that community, and we do to the extent possible be a good neighbor to the community and reach a decision that helps us and helps the local community, and we take them in that priority, first for veterans and families, efficiency, and then try to be a good neighbor. >> all right. i'll ask other panels, are those three good questions we can use not just in va, but with a little bit of modification, use outside of va? >> it's very similar to the process gsa uses, and we have a broad range, but first we consider what is the requirement? is there a federal need for the asset, and, you know, if it's the va, how does it serve the va and its customers, if it's the irs, how does it serve the irs
or social security? that's the first consideration of the operational piece. the second piece is again, the first first efficiently and cost effectiveness. we look at being a good neighbor in the community and we're in all states and u.s. government territories and so we have a critical role across the country we play and particularly a focus on orient development and sustain the as well. >> okay. any other thoughts? okay. back to the issue of delegation and lease authority, some i understand stances done well and other cases, badly. slindz -- as i understand it, correct me if i'm wrong, that we lease more space than we own; is that correct? >> yes, that is correct. >> and is that always the case or something in recent years? >> relatively recent.
i believe 2008 was the first year crossing over to having more lease space than government owned. >> why do you think that changed? >> i think a couple of things. some of it is purely shifting demographics and populations have shifted, agency missions and needs to serve the public have moved, and for a lot of the smaller locations, leasing has become the default mechanism to meet the requirements because you wouldn't build a 5,000 square foot building in a small community with federal construction dollars. we build land ports of entry, courthouses, major agencies, consolidations like the food and drug administration at white oak, the department of homeland security here in washington, d.c., and it's about prioritizing limited dollars, and then for the more generic requirements that are basic office space, they often end up in lease space instead of federal buildings.
>> thanks very much. senator brown. >> thank you, mr. chairman, just a couple more. can you explain -- again, still having trouble wrapping my arms around the whole concept of having the fcc in kind of a -- i mean, here the fcc is used to regulate wall street, and, in fact, looks like wall street with the lavish surroundings that the fact they would even take up in an area like this. gosh, i would think they would want a blighted area in washington, bring economic development, a good value for the taxpayers, and, you know, kind of -- it's a win-win-win all around. i guess i know you were not there per se, but you're still there now; right? >> i am there now, yes, sir. >> and, i mean, how do you explain those kind of lavish surroundings when we're in a period of austerity?
>> yeah. it's my understanding the situation that occurred was this: i don't believe the lavish surroundings for a motivator as much as a flawed process with a space estimate to get the building. remember, at the time, dodd-frank act just passed, the fcc had a significant amount of new responsibilities, derivatives oversight of a trillion dollar industry, hedge funds, new responsibilities. it was going to drive the hiring of a significant number of new employees, and those new employees needed space to be housed. there is a housing versus hiring mismatch. we bring employees on in about 90 days. as you know, it takes significantly longer to house them, and so i think it's my understanding, but believe the people at the time felt very much under the gun to try to obtain space sufficient for the resources we were bringing in. because they used a flawed space
estimate, we were originally looking at four properties in the dc area -- oh, by the way, against the chairman's guidance, to look in the regions for both our enforcement and our examination staff because that's where a lot of the activity occurs. for whatever reason in the broken process, the staff and facilities group disregarded that directive and then tried to look for space, and when they went through the estimate process that mr. kotz described and it was inflated, they arrived at a number of 900,000 square feet. wince they hit that number and landed on that, the other three properties considered were suddenly out of the equation so they believed they were left with only one property. it was an emergency situation, and they felt, at the time, they were getting a good deal because the rental rate received was below the market rate at the time, and that's the way it was presented.
>> okay. i'm wondering if that type of office space is appropriate for a federal agency. quite honestly, that's top of the line space, and i guess i'm wondering i think it would be mr. foley then, what is the square footage recent? are we subletting with clients in there now? how is it working? they are in the space, but there's other federal agencies in that space; right? >> we are working with the fcc to take that on, but we have not come to agreement on a lease and a term with them. we're still trying to figure out which agencies we might align. i understand that they have subleased some space directedly with other -- directly with other agencies, but we were not a party of that. >> other federal agencies. what are you getting for rent on those if >> i don't know what they are getting. it's at a higher represent than we had originally been on the hook for. >> so another federal agency is
paying a higher rent? >> yeah, it's not a sublease, yes, another federal agency, as i understand it, it paying a higher rate. >> you guys are paying basically a half billion dollars and subletting it -- >> we're not subletting it, sir. we're completely released from the two-thirds of the space. >> okay that entity is now paying the landlord a higher rent? has nothing to do with you? another federal agency is paying a higher represent than you were ultimately paying; is that right. >> that's my understanding, yes, sir. >> how does that work? working with other agencies? >> we have not. we have a number of controls in place and particularly for the district of columbia and the national capitol region. we have perspective represent caps in place for all of our leasing actions to ensure that we get a good deal and stay at our below the market. >> right. i want to be sure i understand
this. you entered into a lease, i understand all the background, released from two his of that, and -- two-thirds of that, and now that two-thirds is rented to another federal agency, now a higher amount than the half a billion dollars that you ultimately were paying, so are we just repeating what we just went through with other agencies? do we need to find out who those are? this is like ground hog day, guys, really. thank you for laughing. i don't know how to respond. i didn't realize in my line of questioning, but i guess if you keep digging like we are, you find more and more and more. i'd like to find out, mr. chairman, whether we do it -- i don't know who to ask here. who's the new entity? did they go through the process we talked about here? doing the same thing the fcc did? i mean, i'd love those answers because it's not just passing the smell test today, and maybe because we're the only hearing
here today that are on top of this because i think that's so critical. if you're developing and have in place appropriate leasing guidelines based on all the forfew las and -- formulas and entered into an mou with the fcc; correct? >> it's for all leasing actions going forward. >> right, on other things they may want to lease. >> yes. >> so i understand that -- >> yes. >> how about the entities now taking over? you don't know who they are; right? >> that's done under their own independent authorities i believe. >> senator brown, if i might -- fcc, oca, both independent agencies are in that property now. >> we are working with them to take, i believe it's 350,000 square feet, working through or process to find a tenant and make sure the represent is appropriate. >> great. thank you, mr. chairman, for holding this again.
it's another area, and i learn more and more about where we are wasting money, and i am hopeful the president and both houses are listening to what we're doing because we are # giving them great things to fix. executive order number one, fix it. >> is it -- >> thank you. >> gao gives us a to-do list. there's a high risk list. it's high risk for all of us including the president and his folks and federal agencies and certainly of us. i want to just follow-up on what senator brown's lining qefing and just -- questioning and just ask for the space that the fcc is now occupying or about to occupy a constitution center, occupying one-third of the space as one thought; is that correct? >> senator, on the hook for one-third of the space, and we have no intent to occupy that
space. >> at all? >> at all. >> all right. if you look -- >> represent will be dune -- rent will be dune in january of 2013 and we are optimistic in terms of partnership we will find a tenant between now and then. >> that's good. give us some idea what the cost per square foot of that space would be if fcc were occupying this space in january 1 of 2013. >> at the time it was cost per square foot of $44 which would have jumped to $47 per square foot years later. >> i know what $44 per square foot and how that's regarded in delaware. it would be pretty steep. maybe not so much here, but give us an idea how does that number jive with the rest of the real
estate industry around here, the market, and particularly in this area. >> sure. all real estate is local. there's a number of submarkets in the washington, d.c. area and rent's very, you know, fairly extreme, but our represent cap for the district of columbia is $49 a square foot. $44 is below the prevailing market rate. that said, there are some submarkets and locations within the districts where you can get represents below that. >> so if the other agency was occ, what's the other one? >> fhfa. >> okay, that come in and lease space at the constitution center and if they come at the same rate, are you saying that would be under the overall rate for this kind of office space in dc? >> for the government-wide per represent cap, yes. there's some deals below that in some location, you know, north
of massachusetts avenue and the developing areas we have gotten better rates than that. >> okay. >> for that part of town. >> all right. a different question and one that deals with the corrective activities that was outlined and corrective activities taken place at the occ in light of this i would say scandalous behavior on the behalf of some employees there. what is the applicability of corrective action and how does it apply to all the federal agencies? mr. foley? >> i mean, i think it is an example of how important it is to get the checks and balances correct. one of the advantages we have at gsa is we work with the office of management and budget, and so i think one of the big issues that fcc had in hearing their testimony and working with them was in developing that up front requirement, figuring out how many people they had, what the
right unitlyization right for the space should be and would they be fully funded for all of that. we not only work with the agency to understand that, but we work with our budget examiner and their budget examiner as i mentioned in my opening testimony to make sure that the staffing levels are supported and the rental payment is supported in the president's budget so we know that the people are going to materialize and the funding will be there to pay for it before we proceed on an acquisition like this. >> thank you. the fcc was granted, i believe, independently leasing authority in 1990; however, as the ig has pointed out, they took the fcc19 years to establish a centralized asset and office that handled the leasing activities; is that correct. >> that's my understanding. >> the office of administrative
services i believe in april of 2009 and did not put into place leasing policies and procedures until august 2010. let me just ask you if i could, sir. how many leases do you think might have been awarded over that 19-year period of time, and why with 20/20 hindsight, why did it take the fcc so long to put a system in place to allow the organization to effectively manage its leasing activity? >> yes, sir. to the first question, it's my understanding that we've entered into 32 total leases over the course of the last 20 years. i really can't speculate why there's not one in place. i suppose 32 leases in 20 years might to some say do you need a full-time leasing staff, but, again, i can't speculate. what i can say, sir, is it's
very apparent to us this is not a core competency the fcc needs to be engaged in which is why we're moving into a partnership with gsa. >> you are the master of understatement. >> gsa has been terrific in partnering with us and helping us out of the situation. i want this thank them for that. >> good to hear. how many do you currently manage? >> 15 in the port foal yal, the offices and the space in place facility, we have an operation center in northern virginia, and then we share space with other federal agencies in a very small coop site. it's in southern virginia. >> uh-huh. how long did you work at capital one? >> approximately 12 years. >> uh-huh. taking your private sector experience at capital-one and
putting it side by side, what are you in a year now with the fcc? >> about 14 months. >> uh-huh. probably seems longer. [laughter] what kind of lessons learned would you like to impart to the rest of our federal government given what you have seen at the fcc in terms of real property management? >> in terms of real property management, i would say the lesson learned for small agencies especially like ours -- we're very small -- 3900 on any begin day, 700 contractors with a small real estate footprint, but it's about determining what your core competencies are and are not and i was hired for a change agent and similar to your remarks today, i'm a taxpayer at heart and brought in to create change and move the fcc to a well-managed environment, and i tried to move us out of areas
not our core competency giving them to agencies to do them better. we're doing the same with the reporting system, moving them to the department of transportation, a shared service provider, and going in directions like that for small agencies, at least, i think is good advice. >> okay. thanks for those comments. >> given the size of the constitutional cementer lease both in terms of square footage and funding, why didn't the fcc seek staps from gsa before entering into the lease? you have a good partnership now with gsa, why not seek the partnership with gsa in the first place? >> i wish i could answer that, but i can't monday morning quarter back that one. >> mr. wise, you noted there's 36 agencies with independent leasing authority and generally do some of these agencies with independent leasing authority
have expertise and general controls to ensure they are getting the best possible terms for themselves and their clients who they serve and core taxpayers? >> senator, we don't have a large body of work looking at that question, by we did have a look at where ntsb, national transportation safety board, had issues with the lease of its training facility up in dulles where they mischaracterized or misconstrued a lease as an operating lease that should have been a capital lease and caused some real issues with the agency in terms of its accounting and getting its fiscal house in in order. that leads to the larger point talked about and what you mentioned in your opening remarks is that for smaller agencies, especially that are not heavily engaged in real estate activities, as you know better than anyone, i guess, it's a very comp complicated
environment to deal with leases and construction, and if it's not a core mission or not even a significant one for a small agency, i think it's logical that they need to tread very carefully in this area because it's easy to fall into problems when you have capacity issues or it's a challenge for the add min straitive side of an agency to deal with these things. >> all right. you know, on the one hand agencies can purchase space. on the other hand, they can get this designation, independent designation somehow, and then they can lease or they can go through gsa and lease. how prevalent is the notion of lease purchase, and is that something agencies do from time to time? is it -- where is it more common? is it a smarter approach in certain instances?
anyone? >> i'll jump in with that. lease purchase is something gsa has done in the past prior to budget enforcement act. it's one of those things that triggers a capital lease treatment if you have a bargain purchase option. leasing to own is prohibited because it's scored up front. that said, some of our leases done prior to 1990, like the columbia plaza example i mentioned, we were able to acquire that. we had a lease of $100 million and as it turned out. ed building was worth $200 million and saving rent somewhere in the ballpark of $45-$50 per square foot we don't have to pay once we take ownership of the building. there are advantaging of being able to do something like that, but there are areas and like mr. sullivan said, the budget enforcement agent and the budget score keeping rules limit some
of the flexibility we had in the past. >> that's good to know, not necessarily good it exists, but good to know. that's helpful. a couple more. senator brown, do you want to jump in here? >> just one more. mr. heslop, i don't want to beat a dead horse, but when you say "you're on the hook for the space," but you're not using it? >> right. >> you mean the taxpayers are on the hook? >> the fcc is funded by fees, however, we get appropriation from congress, and basically there's a mixed tradeoff. >> okay. ? >> it's not direct pax theyer dollars, but there's an obligation coming in january 2013 if we can't find a tenant, but the conversation with gsa is optimistic between now and then. >> you're not in that space, but in another space that you're paying for right now, a couple
other spaces you indicated throughout the region? >> right. 11 regional offices. >> okay, i just wanted to be sure i understand that. thank you. >> mr. kotz, in your may 2011 report, you indicatessed the f -- indicated the fcc grossly overestimated the amount of office space it needed and might have violated federal law signing a $566.8 million ten-year lease last year at constitution center. based on your findings what calls did the fcc have in place to lease the appropriate amount of space in the most advantageous location and at the best rate? >> i don't think they had any sight internal controls. that's part of the problem. they are making efforts to put controls in now. >> what were they thinking? >> i don't know. i don't know exactly what they were thinking. >> do you ever ask?
>> yes, we did. it came down to a misunderstanding of whether they needed this space. some folks did fall in love with the space and decided that that was where they wanted to be. they wanted to make sure they could all be in one building, and they wanted to have as much of the building as possible, and, you know, it was a process that moved forward in a relatively quick time without a lot of thorough review or analysis, and it ended up with a very flawed process. >> okay. let me follow-up if i could. as part of the new leasing process for agency proposals they are required to receive congressional approval for leases valued at $2.8 million or more. how is the fcc able to enter into the constitution lease without congress being aware of the potential problems associated with the lease of this mag magnitude, and did the fcc's independent leasing authority preclude them from
having to receive congressional approval prior to executing the lease? >> yeah, i believe there were a couple reasons. one is the independent leasing authority, and the other is what you mentioned several times, the so-called scoring issue. when you have a lease, you can allocate a certain amount each year. if you do that for the first year, you don't get over a particular threshold while if you purchase, you allocate the whole thing in a year and get over the threshold. by using a lease, you cannot be subject to certain notifications, and i think in this case that was a very big negative factor because had there been notifications to omb, congress, conversations with gsa, somebody would looked at it care fry and had a different conclusion. >> two more questions, mr. kotz, if i could of you. what are the requirements the fcc was required to go through gsa for all future lease acquisitions? >> i think there would be someone looking at the leases who is competent, ensuring the
taxpayer got the most value. i think it would be a very good thing. >> okay. and was the constitution center leased in anomaly or lack the expertise to ensure they get the best possible terms when they lease the space. i think i know the answer to that question, you don't have to answer it. >> okay. >> mr. foley would gsa requiring lease space for many federal agencies, as you testified, and delegated that authority to many others. how many agencies do you think have delegated authority to enter into lease agreements, any idea in? >> delegated from gsa? >> u -- uh-huh. >> i have that list here, just a second. looks like it's probably 15 -- the largest user is usda and they have probably two-thirds of the lease delegations from gsa.
many of the others are many smaller in terms of one or two transactions. >> all right. what criteria does gsa use to determine whether an agency should have delegated authority? >> sure. we have a number of criteria. first is we look at the size of the requirement and for the most part, we do not delegate anything over 20,000 square feet that comes into our agency. for the smaller requirements, we look at their management plan. we make sure that they have a warranted contracting officer as i mentioned who can execute the lease in the procurement, make sure they have a plan to follow all the appropriate procurement rules and regulations under gsa's and provide oversight to ensure they are following through with that. >> uh-huh. what type of oversight does gsa perform with agencies who have delegated authority entering into lease contracts, and that said, how does gsa verify an
agency did not lease more space than it needed? >> that is an issue for us, and so we do work with the agencies post award, and we look at the lease contract to make sure that it is in line with what we delegated. >> all right. one of the things i like to do when we come to the end of a hearing, sometimes, and i'm going to do it today, i don't always do this, but today i would like to do it, is you had the opportunity to prepare today, the opportunity to present your testimony to respond to questions and hear what your fellow panelists have to say. let me just ask you to take a minute a piece and just give us any concluding remarks. you are asked for opening remarks, but sometimes the most valuable input we receive is actually sort of a retrospect of concluding remarks. we'll start with mr. wise, please. >> senator, thank you.
>> again, what i focus on around here is how do we develop consensus? how develop consensus within the executive legislative branch, bipartisan, in order to get better results for less money. i'm interested in getting things done, and i think you are as well. keep that in mind. that's the goal, consensus, how do we get things done, and get better results for less money. >> senator, two points. one, talking about building consensus and bipartisanship, i think sifra is a promising start in that direction to hopefully lead to efficiencies and cost savings for the taxpayers, so i think that's a good start or good thought process to be developing as this moves towards the legislation and the differences are reconciled between the sort of three different versions, and the second point is that we think it's very important that in terms of looking at the whole
issue of leasing, purchasing, and score keeping that omb continue to work towards developing and implement the strategy to help rationalize the process. >> okay. thanks. >> thank you, senator, for the opportunity. i would say two things. as a taxpayer, i'm supportive of the sifra approach as well. as a previous former army officer, i've seen the benefit working through and added, and i come back to the comments earlier around lease for small agencies, determining what the core competence is and what it is not, and finding a home for the things that are not, and hopefully that would hit your agenda about saving tax dollars. >> good. what did you do in the army? >> i had a variety of assignments from troop leader to research analyst to working as the chief of staff to the chief of staff of the army at one
time, a wide variety. >> uh-huh. how long did you serve? >> 22 years. >> how many? >> 22 years. >> thank you for that service as well. mr. kotz? >> what struck me, mr. chairman, is what you said about the incentives at the beginning of the hearing. there should in the be an incentive to lease versus purchasing. it should be with respect to maximize value for the pax theyer. that's where the incentive needs to be whether it's purchasing or leasing and we've gone away with that by focusing on one type of effort. if something was done with the appropriate incentives in place, we would all be in better shape. >> good. there might be an exception when leasing makes more sense, in a classic sense where you need a lot of space every ten years, but not for ten years. >> the incentive in that case it's to lease, but in other cases, it's to buy. >> thanks.
mr. sullivan, please. >> number one we heard today is the critical nature having good internal controls and professionally groomed, if you will, contracting and management staff. vas spending significant amount of effort, time, and resources to ensure our leasing staff is fully trained meeting all the requirements and also has a strict internal controls. every lease at va, more than 1,000 square feet is reviewed by numerous offices including general counsel, and secretary signs them all. i can ensure you if anything at va, there's too much view, but i don't agree with that. we have strict controls. the other terms in in leasing in providing medical services is different than providing office space. leases really work well because, number one, the population may shift of who we provide services to, and one thing that's become more apparent over time is the technology of providing medical services changes, so if we do a
ten-year lease, the way we provided mri's ten years ago, radiology, oncology treatment, all of those things have changed, the building needs to be updated for the latest technology and radiology and other telemedicine and radiology as well. leasing works well for that. the third thing is the key to this in the end is to find a way to incentivize the scoring process to be rational in leases and invest where we need to invest. >> thank you. mr. foley, you get the last word. >> gsa vs a well-trained staff of leases folks across the country. i think the area where everyone seems to be in agreement, there's a little, you know, varying approaching on how to deal with this, but it's clear there needs to be some reform in terms of real property. we need to give agency the tools
to manage property effectively. the administration's proposal we estimate as much as $15 million in potential savings that could be achieved. by giving agencies an incentive to rid of property they don't need by finding a way to fund the up front cost by better utilizing existing space or disposing property they don't need, and creating an independent panel to offset the competing stake holder interests that you mentioned and we spoke about in the hearing today, there's ways to streamline the process and make it much more effective for the taxpayers and help save billions of dollars. >> okay. thanks. i'll ask a question of our staff over here. how long do members have to submit questions for our witnesses? >> [inaudible] >> two weeks. all right. and what period of time is there for submitting additional like statements or materials for the record?
all right. maybe two weeks we'll double check that. all right. let me say to the republican staff, anything else you guys have for our witnesses? how did they do? >> [inaudible] >> pretty good, huh. they grade on a curve, so do we. anything else here? all right. well, on behalf of senator brown and myself and those who have fled the nation's capitol and not join us or were unable to, we appreciate your testimony. i was talking with our staff yesterday about this hearing, and actually talking on tuesday about whether to go forward with the hearing since a lot of members, house members and senators have left. i think the house left us on monday, and some of the senators are still around, but a lot are gone. this is not the sexiest topic to hold a hearing on, but we're delighted to have the media coverage that's demonstrated
here today, and we appreciate that. we're talking about a lot of money here. we're talking about a lot of money that is not spent wisely, and going forward, we're going to have to -- and almost everything we do in this government of ours -- we got to find ways to get better results for less money, and whether in this case the leases are paid for by user fees or whether paid for by appropriation -- appropriated dollars -- we have to find ways to do everything, defense, non-defense, discretionary, entitlements, everything, better results for less money. this is an area that will be addressed for years, for years, and for one reason or the other, we have the rose to the occasion and addressed it. maybe we talk about being on watch and i'm on watch here until at least the end of next year. as a chair of this committee and a number of my colleagues serve
on, but on my watch, we're going to fix this problem and pit in place the comprehensive solution to fixing this problem, and we appreciate your help today towards maybe getting us headed in the right direction, and we appreciate the direction going forward to get to the destination the taxpayers would have us arrive at. with that having been said, thank you all for joining us today, for your preparation, testimony, your responses, and willingness to make sure we get this ship headed to the right port, and that's what we're going to do. thanks so much. [inaudible conversations] [inaudible conversations] [inaudible conversations]
[inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] >> a look at the u.s. capitol now where the senate is about to golf in for a brief -- gavel in for a brief session today before they recess and break, they are expected to
unanimously agree to legislation that would temporary extend federal aviation programs into september allowing thousands of throes to return to work. this agreement was reached yesterday afternoon. watching live coverage of the u.s. senate now on c-span2. the clerk: washington, d.c., august 5, 2011. to the senate: under the provisions of rule 1, paragraph 3, of the standing rules of the senate, i hereby appoint the honorable benjamin l. cardin, a senator from the state of maryland to perform the duties of the chair. signed: daniel k. inouye, president pro tempore. mr. webb: mr. president. the presiding officer: the senator from virginia. mr. webb: i ask unanimous consent that the senate proceed to consideration of calendar number 109, h.r. 2553, the bill be read a third time and passed, the motion to reconsider be laid upon the table with no intervening action or debate, and any statements related to the bill be placed in the record at the appropriate place as if read. the presiding officer: is there objection? hearing no objection. so ordered.
under the previous order, the senate stands in recess until 11:00 a.m. tuesday, august 9, 2011. >> the senate has just completed its work for the month of august. before recessing, the chamber unanimously agreed to temporarily extend faa programs into september allowing thousands of employees to return to work. the bill's now headed for the president's desk for his signature. senators will resume legislative work on tuesday, september 6th, following their august break. watch live gavel to gavel coverage when senators return here on c-span2. coming up live at noon eastern here on c-span2 members of the public trustee of social security and medicare will talk about the role of the trustees at the 13th annual conference of the retirement research
consortium held here in washington d.c. again, coverage begins at noon eastern. and on c-span at the top of the hour, president obama will talk about veterans and employment opportunities in a speech at the navy yard here in washington. and coming up at 12:45 eastern we'll have live coverage of the joint economic committee which is meeting today. they'll discuss the july unemployment figures released this morning, and according to the labor department the jobless rate dropped from 9.2% to 9.1% while the economy added 117,000 jobs. this weekend on booktv on c-span2 john ferrell on the life and times of clarence darrow, attorney for the damned. on "after words" amanda foreman on british citizens who fought for the union and the con fed race. and live sunday at noon eastern, "in depth" with ann coulter. her latest is "demonic: how the liberal mob is endangering
america." look for the complete booktv schedule at booktv.org and sign up for booktv alert, weekend schedules, in your inbox. 10, 9, 8, 7, 6, 5, 4, 3,2, 1, 0. these are the stakes, to make a world in which all of god's children can live or to go into the dark. we must either love each other, or we must die. >> vote for president johnson on november 3rd. >> this weekend we'll look at the history of political campaign ads with lsu professor robertman. also former merchandise
detective james he vel on the day jack ruby killed lee harvey oswald, and former speech writers for president nixon reveal how his messages were crafted and communicated. american history tv on c-span3. get the complete schedule at c-span.org/history. in the midst of worries over europe's economy and debt, italian prime minister silvio berlusconi on wednesday addressed parliament on the state of the economy. he reassured members that the nation was with financially solid despite global concern and calls for his resignation. this is just over 30 minutes. [applause] [background sounds] [speaking italian]
>> translator: we will be resuming the meeting now. the agenda is the informational speech by the prime minister on the economic situation of the country. following the speech by president berlusconi, the representatives of the political groups will intervene from the largest to the smallest. for ten minutes each. [speaking italian] >> translator: the floor is yours, mr. berlusconi. [speaking italian] >> translator: thank you, mr. president. mr. president, honorable congressmen and congresswomen, i am here to they've give you the status -- to give you the status of the italian situation of the consequences of the international crisis and the decisions of the government.
everybody sees that the problems of the emergency in these last few weeks are the direct consequence of a confidence crisis that shakes the markets all over the world and continues. both because of the uncertainty on the euro and the push of the speculation. we need to confront this crisis firmly without chasing the anxieties of the market because it fuels them. [speaking italian] >> translator: our country has a solid political system that demonstrated it was able with the opposition's support to approve in only 38 days an economic maneuver of almost 80 billion euros.
heeding the invitation of national cohesion by the president, we have solid economic fundamentals. our banks are liquid, solvent and easily passed the stress test in europe. we also registered significant signs of recovery. [speaking italian] sphwhrt -- >> translator: in july we have registered a significant decrease of the hours claimed for unemployment compared to the same time last year, 28.8%. so we still have the desire to invest, to do business and to solve problems in the our country. the government, its majority, have approved on july 6th an economic maneuver that will insure through provisions on the
short term the objective to balance the budget by 2014. [speaking italian] >> translator: this is a condition that will stabilize the debt and will progressively decrease intensity compared to the gnp. this maneuver in line with the objectives set by the european union, and it was deemed adequate by the international observers. also even this morning the chair of the euro group and then, also, the european commissioner for economic affairs have confirmed the appreciation for this maneuver. and i also had a long telephone call with the european prime minister who called me after our
cabinet meeting. therefore, i would like to further analyze the situation for which we are here starting from the trend of the financial markets. everywhere uncertainty on the intensity of the growth in the world has increased specifically in the united states and in japan, even the strong productivity of e her generalling -- emerging countries is slowing down. in the united states, the difficulties in reaching a consensus on increasing the public debt ceiling and avoiding a default has, have induced a reshuffling of the o investors' portfolios in favor of short-term investments. the bipartisan agreement that has been -- [inaudible] have eased international tension. turbulences on financial markets have been fueled also by the
perception of an excessive slowness in the reaction of european authorities to point of sovereign debt crisis in greece. on july 21st the european council has approved a new assistance program for greece which is aimed at insuring it meets its financing needs and improves -- [inaudible] with lower interest rates, return due dates and with the involvement which triggered a lively debate of the private sector. [speaking italian] >> translator: the council also expanded the capability of the e.u. fund for financial stability to intervene in the managing crisis with more flexibility and economic strength. these are decisions that are important. also if markets have not
responded on the importance of this, of these deliberations. so it is essential to give certainty to markets. we need to clearly define the time frames, instruments and resources. the risk of contagion influence the choices of the e.u. institutional investors pointing them toward activities that are deemed less risky. first of all, the german government falls to the detriment of the other countries' bonds. the tensions have extended to our country but not only to our country. the same problems are felt, as you know, also in many other countries of the euro zone. these tensions have increased the differential between the ten-year treasury bonds and those of the corresponding
german bonds to reach historical limits from the start of the european currency. in the recent issue of public bonds, the yields have increased by one percentage point. as it often happens during crisis, the markets overall are not evaluating correctly the merits of credit. investors' evaluations of our bonds don't take into proper account the soldty of our -- solidity of our banking system, the healthy assets of our families and businesses, the contained foreign debt, the lack of imbalances in the real estate sector and the prudence followed in budgetary policies during the crisis. [speaking italian] >> translator: these are strengths that in various occasions have induced european authorities to consider italy in
conditions of total security. just recently this was recognized by the president of the commission who said, and i quote, i consider unjustified the pressures on our market. [audio difficulty] with their forces, the economic financial crisis. they absorbed large losses on credit, the recession of real economy. they resorted in timely fashion to the capital market equipping themselves with resources they needed to confront very difficult situations. they -- [audio difficulty] also the collection of the obligation in the european markets in the early 2011 was sufficient to address the payment of stocks for the whole year.
the italian banks are today well capitalized, and they are able to -- the recovery of the economy. they are able to satisfy the needs for loans of italian families. [speaking italian] >> translator: the deep-rooted system in the country has allowed this to increase their collections in the, through the families for deposits and obligations. relativity is increased and will -- [audio difficulty] from the expansion of loans by the improvement of the quality of the credit. [speaking italian] >> translator: the decrease in value of our bank stock that are
being registered right now are absolutely excess bive. excessive. for the large institutions the market value is today much lower than the budget value. and also the italian private sector, the families, the businesses is categorized by solid financial situations. families have the least indebtedness compared to the gdp among the large countries. these values are less than half that of great britain and the united states. their wealth is particularly high compared to the international situation. also the debts of our businesses are contained compared to their profits. if today if we add to our public
debt the system of the savings of italian families, we would go up to the second place in europe right after germany and before sweden, great britain and france. but let's talk about public debt. after the explosion of the crisis, our public account was more favorable compared to tw other advance -- two other advanced countries. our budget had worsened. in 2009 the deficit was over 5% of gnp. that value was still lower than -- [audio difficulty] other countries in the area. with the recovery of economy and thanks to our -- [audio difficulty] the accounts had improved. in 2010 the public debt decreased of about one
percentage point, and the primary deficit was annulled. [speaking italian] >> translator: the budget deficit was lower than what we had envisaged as our budget which was as our objective which was our 5% net worth and other countries in the euro zone that was around 6.3%. the path of debt reduction agreed at the european level is going faster. that is what is requested, and that is what we're going to do. the u.s., the u.k. and japan have had deficits between 9 and 11% of the gnp. in may we had, we have defined a budget maneuver for 2010-2012
that will take the deficit to 3.9% of the gnp this year and 2% -- 2.7% next year in line with what has been set at the european level. the data on government needs for the first seven years in this, of this year are in line with the objectives that we have set with a law decree. the cabinet has set a path that will lead to balancing the budget by 2014. the provisions were further strengthened in the parliamentary conversion into law. these interventions will be, will allow us a rapid reduction of the debt right under 113% in
2014. [speaking italian] >> translator: by linking by 2013 of the pensional age with the measures in terms of social security, we further strengthened the solidity of the public accounts for the future. the reforms of the last few years set italy among the countries where the pressure of social security will be the most contained. our pension system was appreciated and judged as an example for the formation of other systems in the europe. so we did not do little. we know that there is much more to do. the effort to limit spending needs to be rooted into measures.
[speaking italian] >> translator: we need to have an immediate action plan that responds to the development of the market. we need to consider measures that will bring to zero the financial needs in the latter part of the year. [speaking italian] >> translator: we need to improve the quality of the public services for regulation that effect our competitiveness. we also need to free resources for investments calling for collaboration of the private investors. so it is essential that the government and the parliament implement the ifs us call -- the fiscal mandate. and modernizing the fiscal structure of italy.
[speaking italian] >> translator: but it's certainly, it is growth, the essential objective. the economic programming committee this morning implemented the plan for the south giving 7.4 billion euros to realize 130 interventions that will relaunch the economy of the south. [applause] [speaking italian] >> translator: signed two decrees. the first one creates the government committee that will provide the necessary information to reach the salary leveling of the elected official and the officers in the public when compared to e.u -- [audio difficulty] [applause]
[speaking italian] >> translator: the second decree decree -- [audio difficulty] and the limit of usage of the service cars, the blue cars so as to reduce their number and their costs. [applause] [speaking italian] >> translator: in order to reach the objectives that we have set, in the meeting that we will have tomorrow with the unions the government will propose a collaboration for stability, growth and social cohesion that will have to be in line with the program presented in brussels in may. the growth of economy -- [audio difficulty] is the consequence of positive convergence of the responsible behaviors of political and social actors, so we will strive to reach an agreement between the government and representatives of businesses and labor on the ways in which
to realize a common purpose. this meeting will focus on four points; managing the economic maneuver and provision for developments, investment for infrastructures, the bank rules so financing to businesses and industrial relations both in private and in the public sector. the, this situation imposes to us that we have to give a strong response on the commitment to growth that will make the stabilization plan credible. for this i would like to anticipate to parliament the subjects of our discussion with the unions. the management of the maneuver will focus on measures that have been teed and to be -- have been tests and to be tested.
the joint monitoring of investment from infrastructures will allow us to have an oversight on the transfer of public resources. it will, um, it are give us the possibility to have an oversight on the effectiveness of the execution and will allow us to verify the effectiveness of the measures on the execution and will remove the chokes on the -- [audio difficulty] the role of banks. this financing is even more important in this long-term difficulty. [speaking italian] >> translator: in addition to the agreements between banks and business associations to guarantee liquidity, the government and these associations will determine the time and the modalities to offer
sustainment to businesses. industrial relations are a fundamental instrument to attract investment when they guarantee productivity for the full -- with the full use of the equipment. [speaking italian] >> translator: the government has offered the unions to see a draft of their reform of workers that we have called statute of work. we need to verify the level of consensus that this one has. the development of territorial or business bargaining negotiation is sustained by the extension of -- [inaudible] of the profit increases that it generates. also the government --
[audio difficulty] also for next year and adequate resources for social safety nets to link with the activities of reemployment of workers. the new laws in the public sectors will require rationalization of the protect protect -- public administration guaranteeing salaries connected to individual and be -- and collective productivity. i will also talk about the cost of politics which is the subject of many discussions. based on the economic maneuver decree, the government will act to contain all the salaries of public officers bringing them to the average european values. also the government based on the
reorganization of provinces which is based on the law, on the decree on the municipal federalism will reach a further containment of the fiscal pressure and a higher efficiency of local services. you all know the cabinet has already approved the reform that will have the parliamentary members -- will half the parliamentary members and limit the cost of productivity. a reform which is really needed right now is parliamentary regulation. we also will be able to jointly verify the purpose of businesses and agency of the government with the objective to either cancel or merging them. [speaking italian] >> translator: my honorable colleagues, before concluding
i -- let me remind you that the economic crisis caught us at a time when we were adapting to new technologies and to globalization. the growth was affected which has been more slow, the effects of the legacy of the past and because of the structural issues that slow down our development. first with the decree on development and then with the three-year budget, the government in line with what we have done since 2008 has introduced 27 concrete measures to sustain the country's economic growth. four relative to the fiscal structure, five regarding simplification and
liberalization -- [audio difficulty] to increase efficiency of the judicial system. eleven to give incentives to the production system. three to give value to the human capital. and i would like to highlight the fiscal detraction that we are giving to organizations who do scientific research, and be a 5% taxes which is the least in europe for businesses that are managed by individuals under 35 years of age. [applause] [speaking italian] >> translator: the government is strongly committed, alsoings for the solution -- also, for the solution of the business crisis. just in the last eight months we solved 30 disputes thanks to the
government action, thanks to the desire to react of the business community and thanks to the collaboration with the unions. and we have been able to guarantee a future for a lot of families being at the side of those who work and produce is one of the best ways to confront the crisis. we will continue to work on this difficult front. we are aware that the defense and innovation of our productivity is fundamental to the economy of our country. our economy is energetic, it's strong with the innovative capacity of businessmen and the responsibility of unions that was reflected in the recent statement on the need to accelerate the relaunching growth. ..
>> translator: i take up with national adhesion that solicited often, a wise warning that i make my own. all have the duty to roll up their sleeves, our duty, whatever our political affiliation is to operate for the good of italy and to recreate the development of the economy doing our part, and remember political stability is the winning weapon against
speculation of our colleagues as i am concluding, nobody is denying the prices to overcome it. [applause] >> translator: you are listening to an entrepreneur who has three businesses listed in the stock market. [inaudible conversations] >> reporter: therefore, he is in the financial trenches aware every day of what happens in the market. [applause] >> translator: we each have to do our part. i don't think -- i don't believe, i'm not asking to
support our program, but i really hope they can contribute with their ideas and with their proposals to have put in place what the country needs. i am asking that the opposition to do what they have deny called to do without losing sight of the common objective because i know we have the same objective to bring italy out of this crisis that is not italian, but it is planetary. i assure you that the government will be -- will not be deaf to your proposals and ideas, that when they will be up -- inspired by their pay tree -- patriotic spirits. the government will have to do its duty, will have to complete its assignment. the italian people called us in 2008, and we will complete it in
2013 and we'll begin submit for their judgment with a serene awareness of having done all that he we could for our country in such difficult times. [applause] >> translator: in the 20 months that are still before that appointment, governments will do the government, complete the path of reforms that we have already submitted to the parliament which is -- which are all very important for the country's modernization. it will strengthen even more the relation with union, and will propose intervention to sustain the growth of italy. to the italians, we are saying that the government is ready to do its part. we have the determination, we are aware of our responsibilities, and we have the profound desire to give to
>> the house of representatives has been off weeks already this week. did you get eight weeks of vacation because i didn't. >> former russia today, now the rt network hosts alyona who takes a view on the u.s.. >> we are willing to step outside the box, do something different to mic tv news exciting and intertaping and informative again but rather than, i'm sorry, the garbage it's dwindled down to be. >> she'll talk about her show and network sunday night on c-span's q&a.
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>> executive directors for both the nfl and nba players unions on wednesday took part in a discussion about collective bargaining rights in sports. the nfl last month ended a lockout resulting in a ten year deal. in the meantime, the nba locked outs players on july 1st after a recent labor deal expired. they cited the union for unfair labor practices. >> i want to let everybody know that initially myself, mr. hunter, and mr. smith, we're going to stand because they'll be speaking to you initially, and then we'll be up there in comfort on the chairs. so on behalf of the national bar association, i want to welcome everyone to the executive director's forum. we all know discussion plays a major role in american society. we all look forward to sunday
during the football season, and we look forward to -- during the week and on the weekends when the nba season comes. the sport industry developed into a multibillion dollar industry, and two of the biggest sports of all the professional sports is football and basketball, and the two attorneys who happen to hold those players together are two african-american attorneys, mr. william hunter and mr. demorris smith of the nba respectively. today, we have mr. william hunter. he took the helm of the players association in 1996 and was named the executive director of
the national basketball players association. the union of current professional basketball players in the national basketball association. his principle duty is to enhance the financial education and emotional well being of 430nba players. mr. hunter continues to align his efforts with the nbapa's mission to ensure the rights of nba players are protected, and that every conceivable measure is taken to assist players in maximizing their opportunities on and off the court. under billy's leadership, the nba players utilized their bargaining power to challenge how the nba is run and how money generated is divided. receiverring as chief negotiator during the high profile negotiations currently and the past agreement which culminated in the 1999 collective bargaining agreement. now, what a lot of people also
don't understand is mr. hunter is also the head of the wnba players association for the women nba players association is an organization he created, and now they also serve the women nba players. well, mr. hunter arrived to the nbpa well prepared for the high visibility role of the renowned sports yiewn non. his diverse background includes a stint as a professional football player with the washington red skins and miami dolphins and u.s. attorney in miami and san fransisco. he graduated from syracuse being can want of the football team and received his first doctorate from howard university. he was also a local prosecutor and a san fransisco district
attorney's office -- and with the san fransisco district attorney's office, appointed by jimmy carter in 1977, and after serving as u.s. attorney, he developed a private practice basically representing white collar clients, and he's represented such individuals as san fransisco mayor willie brown, mc hammer, deon sanders, henderson, and a host of athletes and entertainers. with that, join me in welcoming mr. billy hunter. [applause] >> thank you. [applause] >> i put mr. submit's bio bigger so i can wear my glasses. he's the executive directer of the players association on march 16th of 2009. he replaced the legendary gene
upshaw who passed on august 20th, 2008. his election -- prior to his election, he was a trial lawyer and litigateing -- mr. smith served from 1991 to 2000 as an assistant u.s. attorney in the district of columbia u.s. attorney's office incoming service as a senior prosecutor in violent crime section in the transgnarl major crime sections of the office. mr. smith then served as counsel to deputy attorney general eric holder and lead representative to the law enforcement inaugural committee and served as the u.s. secret services agency command center in the 2001 presidential inauguration. during that time, he focused on
white criminal defense and tort liability trials and chair of the firm's government investigations and white collar practice groups. he argued numerous cases before the u.s. court of appeals and the district of columbia circuit and district of columbia court of appeals where he defended individuals in high profile criminal cases and criminal investigations as well as fortune 500 companies in complex cases, compliance manners and internal investigations and just recently concluded the nfl agreement so we get our football on sunday. please join me in welcoming -- [applause] with that, i'll have mr. smith start off by saying a few words. >> first, thank you for the round of applause. it's a pleasure certainly to be here. it was really billy's idea to stand up throughout this whole thing.
[laughter] fine. [laughter] fine. i'm happy with a chair. i will not take a lot of time because i know a lot of you have questions, and i know we'll going to have a great discussion. when you said i was in elected in march of 2009, my first thought was, that's not right, it was ten years ago when i was six feet tall. [laughter] a very long and extremely public fight over the last two and a half years, and i'm most proud of our young men and their families because at a time when people were very quick to make a judgment about their resolve, their ability to stay together, their commitment to fairness, when many people doubted that they were capable of that, our young men demonstrated tremendous amount of resolve,
and that was really the only thing that get us through. when billy and i are together in the back, we tell stories how it's all about us, but the reality of it is the work that we do is tied to the strength of the men and their families that we represent, and we are certainly at the tape breaking moment. billy is where i was two years ago. the last thing i will say is that in a few minutes you're going to hear from one of my best friends, and i don't know if billy remembers this, but in november of 2008 when i was being considered for the post, but came up to harlem because we had a friend in common, and the idea was we would spend 10 minutes talking about his job, the job i was hoping to have. three and a half hours later, billy walked out saying that i'm going to continue to pray for
you, and you're going to be the right man for the job, and he's an incredible man, and it's a pleasure to call him my friend. that's all i'm going to say, and i'll recede to the gray-haired gentleman. [applause] >> he left out when i suggest that we stand, i have arthritic knees, and when i sit down, i have a hart time getting up. [laughter] i can't think of any time in history, two people, african-americans, who head up premier organizations, the nfl and nba respective unions representing all the players with this global presence and celebrities throughout the world, and also to be part of an operation that generates billions of dollars per year, and so it's really great, and i've enjoyed a relationship with
him two years and prior to him i received as a lawyer when he -- when his brother opened a business in california where i resided as well, but, you know, it's been a long ride. when i look back it seems time has gone by pretty quick in the sense it seems just like yesterday when i got herings but there's been interesting moments. i probably -- we probably have two of the best jobs. i can't think of any better job in the country that people could have. one, you have a hand smit salary, hang with the celebrities, and have other perks like traveling the world, meet all the big, famous important people so it's just great, but the real prize is being in work with these young brothers. in my situation, i head up a organization that's compromised of 85% of african-american
males. i can tell you from my advantage point, you know, these are really some great kids, growing to be men, and that's what we're trying to help them become in the process of being confronted with all the tapings they get. it's not possible without them. in 1998, i went through my first lockout which you all know lasted about seven months. our players lost about $500 million, and the owners lost over a billion. since then, the amount of money our players have earned increased exponentially. in this past season, the players earned about $2.3 billion, 430 players, an average salary in the nba of $5.8 million. 50% of our players either made 2.9 beneath or above.
that was sort of the breaking point, and we're now in the throws of one of the most vicious fights and battles i've been engaged in. this is the third collective bargain agreement i've negotiated. in 2005, we didn't have an issue and reached an agreement in a matter of a few weeks, didn't take long at all. this time around could be down and dirty unfortunately. i was hoping we could avoid it, avoid throwing this thing into the courts, but as you are aware, yesterday, the commissioner elected to bring suit against the union and the people players, and we're now engaged in responding to that suit, but in the context of all of that, we are still in the course of negotiating, so i was surprised when they filed suit on monday, and had negotiations, and everything was cool, and then walks out, goes in front of the cameras saying the players are or the union is not
negotiating in good faith, and next morning he calls me at 7:30 a.m. saying we're following suet against you at 9 a.m. today. i said, okay, if that's the way you want it, so be it. it's ironic because i think when we decided to petition national relations board, what i did was we called him beforehand saying we're planning to do this because we had some meetings coming up, and i thought it would be embarrassing, and i didn't want to snooker him by sitting up negotiating with him, walk out of the hearing rather than negotiation, hit him with a suit. that's the way it is. we'll open it to questions. this will be a good lively session. don't hold back. any questions you got, don't be afraid to ask them. they'll be some that i may not be able to answer simply because of the current status of my situation because we're still engaged in negotiations, and i
can't promise you an agreement before the season. i'm hoping that we will. the reality is that if we don't get one, collectively the owners and players stand to lose about $5 billion, so we're going to work hard to try to get it. the problem is that the gap is so far between the two of us because of the way the terms and negotiations, and we'll explain that to you as we go. any questions you have, feel free to ask and hopefully we'll be able to answer them. thank you. [applause] >> isn't this better? [laughter] >> yeah. >> the don't hold back was for billy. [laughter] hold back as much as you would like. [laughter] >> well, you mind me calling you
billy and -- >> i've known billy for almost 20 years when i was a young lawyer, and he walked into the courtroom and the sea parted. [laughter] >> no. >> who is that guy over there? [laughter] well, here's where i'd like to start. i'll start with you, billy. you know, as you said, becoming the executive directer of the nba players association is probably one of the greatest jobs anyone could have, and i think when you go through law school, that's not really a position people really think about, so how did you plan that acquisition? >> i didn't think about it either. ironically, i went back to syracuse after 25 years, having a coming back together for the athletes, and they being was a guy i helped recruit to the
school, they were two years behind me, we were all back there together, and dave asked what i was doing. at that time, i was engaged in private practice and u.s. attorneys office a few years before. about a month or so later, he called and said are you familiar with the nba players association? i said, what is that? he said, well, they represent the basketball players, a union for the players, and they are moving on executive director, and i think you're the guy for the job. i can't promise it to you, but i'd like to submit your resumé and get behind you. i said, okay. that's how it started. i got the interview, and then from there, i was interviewed by a group of players, michael jordan included. we had like a three-day process whereby there's 15-16 candidates from corporate america and private practice, ect., and we
were interviewed by 33 ballplayers in the room, all of whom were the team reps, michael jordan, buck williams, ect., a group of them. every day they would cut somebody. it was like playing football. you get cut, they call you, turn in the book, and you're gone, and so by the third day, there's three of us left, and that's myself, another one who is president of the dallas mavericks now, and the other was bill strickland, a lawyer -- agent in washington, d.c., and i got selected from the three. i was the guy that the group chose to become the head of the union, and that's how i got here. >> okay. d? >> very similar to billy, both of us have very similar backgrounds, prosecutors, u.s. attorney's office, private practice, and in october of 2008, i got a call at the office from a search committee, and
they left a message and said are you interested in a, you know, new job career, and to be dead honest with you, you know, i told my secretary, no, i'm not because back in 2008, you know, we were heading into a historic election, and we all thought that we would be able to elect our first black president, and i had been involved in the campaign and really on my horizon was potentially going back in the government, and so the idea of, you know, switching firms or a new opportunity really didn't appeal to me, but about a week later, somebody called back saying, well, we're calling you about the executive director job for the nfl players association. similar to billy, it started off as a process with a lot of candidates that got dwindled down, but to cut to almost the severe question -- i think if either one of us started out on
our career saying one day we would be sitting in this job, we'd probably tell the person who said that to stop drinking because it is the not the traditional career path, but i think the gifts or the things that you are able to learn in a job like being a prosecutor or representing people in very high stake situations, running a firm, being in a management position, all of those things are things that i tax every day to do my job. to be blunt, i couldn't imagine a better training for what i went through and what billy went through. >> well, d, let me follow-up with you. you replaced gene upshaw who from all i read, he had a good relationship, and whenever they had to negotiate the new
collective bargaining agreement, it went pretty smoothly. >> on the surface. >> how much pressure did that put on you given that you were replacing gene and the nfl commissioner was mr. goodell, did you feel pressure when the collective bargaining agreement came up? >> we both have jobs where we'd be lying to you if we said we didn't work in high pressure, high profile, win-lose paradigms. >> right. >> but you know that's not different than standing in a homicide case or representing a corporation at a large scale negotiation. it's all pressure. you know, i've always told people about the comparison that people want to make between gene and paul, and roger and dave is everybody tends to look at where those relationships ended rather than where they started. you know, most people don't know
that paul tagley cross-examined gene during the reggie white trial and early on in their relationship i promise you going through everything i read about gene and what he left for the person coming after him, when it started off, i'm sure there was not a day where one of them was not trying to tear the head off the other one. did that relationship evolve? yes. in the same way, i'm not sure that any two people have been thrust in a more high profile, high stakes relationship than roger and i, and he's going to do what he's going to have to do, and i'm going to do what i'm going to do. >> right. >> and you try to move that relationship to a point where there is -- there is trust, and there's a mutuality of what you
want to achieve. it doesn't mean every moment is skipping down the lane holding hands. no, i think the most important thing that you can do is never take anything personal, make sure you understand what your business objectives are, and perform your duties at the highest and best level to represent that you do, and that's how -- frngly, that's -- frankly, that's ultimately how a deal gets done. ..
corporate america where you lay off people and the salary of the head of the corporation continues to grow. if he's only 23 million in the face of the economic, this economic picture they painted for us, and somebody needs to go back to re-examine things. >> now, at least from my vantage point, every time both nfl and nba have renegotiated television contract, the figure has gone up. i don't think i've ever seen the figure below are. why do you think with new contracts being negotiated at
higher amounts the nba owners are trying to retract the income of the players? >> well, because i think the really compelling issue in vinegar issues is really one of revenue sharing. and unlike the nfl, we don't have aggressive revenue sharing plan in the nba. historically, where they been able to give money to the owners is through the luxury taxes we impose on employers and we have an escrow, where we have a cap of 57% over the last revenue we've had for the last five years, and they hold back up to eight or 10% of the players seller. and if the players collective sellers run above the 57% number then they were able to keep that eight to 10%. they would then use that money to distribute to those teams, it was a wave to keep them to stay under. i kind of lost the question. >> my question was, is that you set the negation for this time
around are tough and everything, the owners are suing everyone is losing money. yet every time i see a tv contract negotiated -- >> so what's happening is easy to make it event on the players, and that's always the way that owners tend to react. they think the players should give back. there has been a negation that i'm aware of yet, not on during my tenure but over the last 40 or so years of the nba, that the players haven't historically given back something they agree to the imposition of a salary cap in the '80s, and then there were other restrictions that were imposed. sort of like the concrete negotiating trying to great the perfect system. so in our situation there saying what they want, they want a guaranteed profit at the expense of each team above 20, 30 million per year. all rebuttal has been there's no business where aware of that gets any guaranteed profit. but what i'm saying is opposed to forcing new york city or l.a.
or chicago or some other big market teams, to take back i think that's part of the internal problem, that clearly within that group. there's a lot of fighting going on and i think the commissioner feels that it's much easier to approach it, demand from the players by threatening a lockout and locking out that it is to try to resolve it within their own group, meaning forces team to step up. i know he may not own up to it, but i know that is a reality. that's what the problem is. and so he has made a commitment or a promise to them that they would have a deal, structured similar to the one that was imposed on the nhl players in 2005. when it broke the union. well, we are not the nhl, and reality is that it may be a promise he made that they will not get to keep. and i told him before that the only way to get what he was looking for is after he and i
bloodied each other up for a while, and then we will see. >> mr. smith, the nfl players association signed a 10 year agreement. and you know, they renegotiate television contracts. they tend to get more money each time. you ever think about signing a five year or seven year agreement as opposed to 10 years? >> i think the right analysis for any deal is not the length, but the mutual part of the contract that benefits both you and everybody else. you know, if two people get together and decide that they want to do business deal and the first thing you're talking about is when does it end, it's not the most conducive atmosphere or getting a deal done because at that point you're into discussion will naturally turn to am i going to be better off
after five and he is. and if i'm not better off after five, go ahead and finish to break the deal. it seems to be the right way to look at any deal is to structure it in a way that provides for stability, a definite share of revenue, and in our case for have the lowest or shortest career path, how to create a business model where we can try to make our players work longer in the system. so if you end up in a situation where you have to trade the length of that deal in order to try to ensure that career is longer, that's what you want. >> so with our deal we ended up, and we're not quite there yet, but we ended up looking at this as what's in the best interest of those young men who play on
average for 3.5 years. and where virtually every career ends on an entry, not by retirement. so if you start to take steps, to decrease the amount of interest but also taking steps to ensure that you're going to get compensated in some what if you have an injury, those things become the drivers of a fair deal as opposed to the lack. >> can i piggyback that? because kerry, in our case, unlike the nfl, we have indicated to the nba we are not prepared to do a 10 year deal. the longest deal we've done is security with a one year option which was for the past cba that expired on june 30. they elected not to exercise the option for an additional year. the reason being is because they contend they're losing money. what we are saying then is why don't we do a shorter, let's do a five year deal and take another look at this thing five years from now. the reason why we say five years
because you mentioned the notion of the tv contracts and 50 z. being paid. and reality is that's where the revenue generations are. they are extremely lucrative for professional sports. so we know the right now the india probably has one of the lowest rights paying tv contracts, a 16 year deal about six or seven years ago. it is due to expire in 2016. what they've done is they're projecting it over 10 years that you're proposing that there'll be a four to 5% annual increase in revenue, with exception of those two years when new tv deal would expire and they would be going back to negotiation. and they're projecting a seven to 9% increase in revenue. when the nba tells you it's going to be four or five, seven or not, that's conservative. so they're projecting that within the next past year, total revenues were about 4.2 billion,
4.2, 4.3 billion figure projecting within the next four to five years annual revenues will reach as high as 6 billion. so with those kinds of numbers, there's no way the world we can do a 10 year deal because will not do a 10 year deal with the numbers you're proposing. the numbers you're proposing is players and sellers he frozen for the next 10 years. then they don't participate in any of that growth. so we are saying the numbers are gargantuan, and there's no way that we'll have our players playing, providing the services, causing people to tune into the tvs and shelf and arenas and not share at some level in the growth. that's why we are at an impasse. >> look, you know, everyone i think probably takes a look at what we do on the outside and thinks they understand what it is. but both of us spend a tremendous amount of time and
regular economic theories. and try to figure out what the trends are going to be, what the growth rates are going to be calm and those things become significant drivers of what's good for your players at that time. and our systems are similar in some respects, dissimilar and others. one significant issue for us is we are taking 55% of the tv money going forward. which is a change over time. so those economic drivers, and your respective analysis of those things become very important but i will share one thing. anytime a sports league says that the growth rate is going to be ask, it's going to be x. plus. [laughter] >> right. >> by the other thing is, football is the prototype sport. i mean, the people in the nba
and the nfl, people in hockey envy the nfl. unit, reality is the nfl is the big boy. it's the alpha and real. it generates more money then, generates more money than basketball, hockey, baseball. they just don't begin to compare. these cats are generating about 10 billion a year. spent i'm not getting paid 10 million. [laughter] make it sound like. >> well, dee, let me ask. billy, i know in the last nba collective bargaining was when they implemented the chat on rookie salaries. and what i noticed was, without knowing any of the details of the new collective bargaining agreement, i noticed in past years there were a lot of holdout, particularly with first round draft picks. and i was surprised i opened up
the paper couple weeks ago and i saw that camden had already signed, and design for about 50 something million less than the years previous first round draft pick. or first pick of the draft. spent about 35 spent about 35 and. so is it now a salary-cap for rookie? >> no. what we did in our system was look at the top 10 to 12 picks in the draft every year. and look at what that impact was over the overall rookie pool. obviously the league wanted to restrict rookie scale that we felt was a nonstarter for us because year after i got please, it becomes a veteran weight scale, not a rookie wage scale. what we ended up doing was basically freezing the rookie pool for 2011 at virtually the same amounts that it was in
2009. so we don't have a cap system. we have a pool of money that is available. and then the other issue became, you know, back to our core and fundamental principles. those top 10 guys, there's no other way of looking at it. they took the largest decrease in the overall rookie pool system. but what we are able to do was push more money down to picks 15-32, and then remember, we've got rounds two through seven. so we were able to raise the minimum salaries of all of those people below. i mean, when people watch the draft and nobody is like, you know, you come into the national football league and you make a billion dollars. most of the young men that came and played football for us have an annual salary that is less than 600, $700,000. so everybody remembers that top 10 picks. everybody forgets everybody after that. so what we did by decreasing
that money, we pushed money down. but then we also pushed a lot of that money into veterans, proven veterans. because you do have a number of veterans who have proven themselves in the years two, three, four, five and six, who are nonetheless getting compensated at a rate that is smaller than an unproven rookie. so the idea was to push down. >> that makes a lot of sense. ladies and gentlemen, a few more questions and i will ask billy and dee, so if you have questions, you can start approaching the mic if you have a question to ask. billy, think we're going to have an nba season? >> if i had to bet on it at this moment, i would probably say no.
and the simple reason, because i just haven't seen any movement, any indication at all. i've been dealing with david now for 15 years. david stern. this is the first time where i am somewhat befuddled, because i haven't been able to read him your i think, i think he can read me. in a sense that we are both dug in. i think the circumstance has changed among his constituency of voters, and you know, he's a very impressive commissioner. in the past he is had pretty much carte blanche. but i think in the last six or seven years there's a new group of owners who have come in and paid premiums for their franchises. and what they do, they're kind of holding his feet to the fire so that he can't come even if he wants to negotiate with me and
make a compromise, he can't. listen, we are $800 million apart per year. not for the total deal. per year. he started out, the owner started out in august 2009 demanding that we give them back a billion dollars a year, and then they came down to 900 million. we went almost two years in about, i guess a month and a half ago we made a proposal that we would give them back 100 million a year, and we're due a five year deal. so we're talking about getting them back about 550 million over five years. and they said that was a nonstarter. they said no way. that they were at 900 million, and unless we were willing to give them 900 million, you know, we just weren't negotiating. we said were prepared to talk about other things, chocolate tweeting the system. they said we don't need the changes, at least we don't think you need to turn the system on its head. what we can do is make the adjustment you need and help
those that you contend are struggling through revenue sharing. and to revenue sharing is great in a meeting but it always tends to detour. so they go away from that. so when you say, the final analysis, will there be a season? the only way there'll be a season if there's something, i don't want to say catastrophic, but something has to happen that both of us can use as leverage, you know, to save face. save face in this sense that i can't move to him, know what i'm saying? and he has taken a position that is so far away that it's not -- what happened on our proposal, we've got a guaranteed 57% up through this last deal. and when we agreed to give back the 100 million a year, that takes our percentage down to 54%. so that was a leap for me to go from 57 to 54. that they won't be going down to
47. that's ludicrous. junior, it just can't be. there's got to some of the way we can resolve this thing otherwise if they continue to be the way they are, then that's why i'm saying that something has to happen in order for him to convince those group of owners who are preventing him from being reasonable, you know, allowing him to act. >> well, what if kobe bryant, kevin durrant, derrick rose, lebron james, dwayne wade, for example, signed with european teams while the lockout goes on? >> what happens is they have extended contracts, meaning they've got contracts that extend beyond the current season. if we were locked out for the season they could go. within any given moment there's a resolution they had to have it out in a contract to get to come back and honor the nba contract. but i can assure you that every
marquee player who ends up signing to go to europe or to asia, whatever, it is opening eyes. i know it's got to be causing some stress within the ownership committee. take a guy like kobe. they went two weeks ago and are able to get $3 million, there were eight of them and they went to the philippines and they put on two exhibition games. they were paid $3 billion. colby, derrick rose, kevin durrant, derek fisher and a few others. that was something that they got on a lark in the sense that some rich mogul in the philippines wanted them to come. so he reached out to derek, and derek but the plan together, told them what they need. and they agreed to pay. so when these guys go out and enter into these kinds of deals on their own, it kind of opens their eyes and begin to understand more about the business, including much more of what the own personal worth is. for the international global market. not just the u.s. on the global market. i don't think there are any players in the world who are
better known globally than nba basketball players. and so, that's -- i think it clearly adds an impact. i don't encourage them to go but by the same token if we're not going to stand and wait if they elect to go. >> all right. well, at this point i'm going to open it up for the audience. we've been going for a while. man, do you have a question? >> yes. >> and can i get one copy at to the audience? particularly as it pertains to billy hunter, a lot of us are attorneys in here and we are about to go to trial. if some assess what's our trial strategy, for, you know, i would just say, yeah, we may want to avoid asking what is the negotiating strategy with the owners. >> all right. well i won't be questioning like that. i am retired judge stacy collins from cleveland, ohio, howard law class of 1970, along with billy
hunter. and my question is this. we had a sports seminar on monday, and in that seminar the a lot of questions, or comments, about the difficulty of african-americans being able to become agents for the professional players. and i just wonder from both mr. smith and mr. hunter, if you have any suggestions for those persons who might want to get into that area? >> let me say, let me first acknowledge who judge collins is. she and i were part of a group in 1960 that locked up the howard law school. anymore radical day. [applause] >> and what makes it so unique is i think she was the valedictorian of our class. so when we -- [applause] >> so when we convince daisy to
stand with us we that we accomplished something, you know? [laughter] but becoming an agent is not difficult at all. all one has to do is get an application, you file, fill it out, pay a fee. i think in the case of the nflpa, you only have to take a test they didn't have to take a test with our organization. we do a background check, and then you can become an agent. i think what most people are alluding to, daisy, they want to know how to become a successful agent. and i can't tell you how to go and get the players because that's the key. when you break into this business, it's sort of, it's a high volume investment. because most of the major agents, they have runners, and identified these kids when they're in -- when their
teenage. they take summit on the way because they cultivate these relationships and that's how it is. and today, particularly when you look at the black community with the economic stress that we are suffering, if you're a parent and you've got a kid, who has any kind of talent and people come around and they begin to tell you what they can do for you and he, and they offer you 20, 30, 40, $50,000, then you might be inclined to take it. it's not lawful, but we know that that happens. so i think that's what you're competing with. so, if you know of a kid and you have a relationship with him, with he or she, and their parents or somebody close to them, i would suggest you cultivate that relationship and try to stay in touch with that kid, figured if when he makes it, he will look back and take you with him. >> well, i think, okay.
>> when they start, when the owners start talking about they are losing money, they are always hard but from the revenue side. never talk about from the equity side. jerry jones, his cowboys are worth 1.2 billion? >> roughly. >> what did you buy them for? >> 400 some change. >> twenty years he made $600 million. >> the average team in the united states increased in value by about 500% over the last 15 years. >> okay. and players get none of the increase in value, equity, of that, whereas if you're a ceo -- do they? >> i think, look, it depends on how you think about it. the only reason that teams increase in value are primarily the driver of the tv contracts, which drive overall revenue, and
gc revenue in our sport go from 4 billion nearly 10 billion in as many years, do the players reap a benefit of the tv contracts? yes. do the tv contracts of up the buying price of the teams? actually. the more nuanced question i think is, when the team sells, doesn't take a portion of the selling price? no. >> if these individuals who are producers, employees they are producers because, we are looking at them and they are producing together with to produce all of the revenue. all right? so the top earners, the top stock progress at goldman sachs, they make more than a changing. and they get stock options and what have you.
.co players can't on basque balkans. football players can't own football teams the nhl players can't own nhl games. black players -- these football players and best ballplayers are precluded from the equity side, and whenever we hear on tv, and this is not to knock you guys, okay? but whenever you hear on tv, you always hear about them losing money, but you never, the stock price, i mean the value of the team never goes down. all right? so why is it that that's not brought out -- they want is a franchise player. why does the franchise player, if you want to preclude him from moving, why can't he get a piece of the franchised? >> hey, look -- >> but speed is nothing would make me happy. nothing would make bill -- billy happier. but look, you're preaching to acquire. i i mean look, we are in church.
there isn't a time and billy wouldn't want that for his players and i wouldn't want it for our players. that becomes the holy grail, i think of our that line in the sand is between owners and players. so i feel you. nothing would make me happier. because at a time when we are in our battle, one of the proposals we had was okay fine, if you want money back, fine, just give us a share of the national football league. and that didn't go anywhere. [laughter] frankly i thought it was brilliant. [laughter] but it didn't go anywhere. and that is because, for any number of reasons. but look, i believe you, and think that one of the more creative models going forward in sports could be something like
that spent and i just want to end by saying i think that we have to advance the point with these individuals. one day when they start getting equity in what they're building, no one goes to see jerry jones run the 40, catch the ball, score a touchdown. nobody cares who the owners are. we care who the players are, and that's what we look at. i think we need to move to the point. and i just think, yeah, it might be because we're black, the majority of them are black. but i think we need to move to the point where we opened the publics i, not only to the equity side -- not only the income side, a to the equity side. if you are ceo of ibm you get a salary and you get stock. 10 years from now when you sell your stock to sell it at capital gains so you don't even pay the income tax rate, you pay like 10% so you get a break there also. so i think that when they are saying that a lot of people
don't realize that they don't see it, but it should be brought out to the public so they realize the owners are making out like bandits and robbing the players. and his players, what do they have once they are finished? thank you. [applause] >> all right, i appreciate the brothers question, but we've got a lot of people in line. so if we could just ask a question. >> good afternoon. [inaudible] i'm an attorney -- [inaudible] >> can you speak up a little bit? >> hello? i'm an attorney in new york. my question is -- to questions a very short. with revenue sharing being such a critical component of negotiation and also in terms of common benefits to the players, how do you navigate through the process of making sure that
obviously you're being the best advocate and that there's not terms that are adverse to the players interest negotiate with the tv contracts, if you're not at the table, and in the second question is regarding retired players, the issue is, especially with the nfl with retired players in concern about their interesting protected. .. >> it's the first time in history teams contributed to the
pensions of players, so the owners -- [applause] to your other question, that's what our job is, and, you know, we sued the owners over the tv contracts that they negotiated in the past because we believed they were structured in a way that actually hurt the players, and in this deal, we actually increased the language on revenue maximums and compliance so that the lawyers who were sitting here and the lawyers working for us have more tools to make sure when the contracts are negotiated, they are negotiated in a way that the negotiators have on two hats representing the interests of the players and representing the interests of the owners. >> thank you. >> one more caveat, and thank you for the question. can everyone speak up because it's kind of hard hearing you from here.
>> i'm an attorney in texas, and we've seen on both sides a lot of strong leadership from the players, strong groups of players coming out and speaking out, and then we've also heard the occasional buzz from players maybe not involved in leadership necessarily, but have their own opinion of what's going on. what role do you think particularly long term drawnout negotiations, what role do you think that plays in the cohesiveness of the teams and the players, and does that issue actually come up in the negotiations, ie, the longer this goes out, the more frustrated everyone's going to be and we don't know how it plays out, especially if you're looking forward to having a season at the end of it. >> from our side player solidarity and cohesion is a factor. the strikes in the 80s, there were significant high profile players who crossed over.
when i took the job every time a met with a group of players, i named every last one of them that crossed the line and let their players stand on the sidelines and suffer while they crossed over to join the owner's side. i mean, you know how i feel about it. [laughter] i didn't have problem calling them out by name because they hurt their fellow players, so a year ago we started the season in minnesota on that thursday night with drew breeze and the new orleans saints walking mid field and hutchenson bringing mid field and holding one finger up to represent the solidarity between each other and our fans. that's the way we started, and that's the way we finish. your opponent is always sitting there thinking your players will not stand together, and until
they become convinced that that's not going to happen, that's when things change. >> thank you. >> i would say in 1998 when we went through the lockout, started two years before meeting with each of the teams and the players, and i actually prepped and conditioned them for the lockout which i knew was coming, and just as i predicted, it did occur. we were not as prepared in 1998 as we are today, but we held it together for seven months, and at the end of the seven months, we struck the deal with the nba when the commissioner thought he was going to be forced to cancel the season. this time around, we spent the same amount of time, better prepared our players, and i'm convinced that if our players are locked out for the year, that they can withstand a lockout, and i think the owners know that, that they are prepared because as i talked about is that we got to be prepared to hang if it means
shutting it down for a year, that's what we have to do. now, obviously, one of the problems you run into is the length and careers of professional athletes. it's short. the average basketball player is four years, football is probably three to four years as well. if a guy misses a year, it's significant. if he misses a year, and he's going to earn $5 million this year and $5 million next year, he loses the $5, end of the career, that's a big hit to take. i remember that issue came up in 1998, at that time patrick was president of the union and announced he was prepared to blow his entire salary for that year, and i think because of the position that patrick took and respect other players had for him, we were able to hold everybody together. he was prepared to sacrifice $20 million. what he was willing to do some players are saying he's always made $100 million, so for him to
lose $20 million is no biggie. i assure you, $20 million is $20 million. [laughter] he lost over $10 million, but, you know, when i look at a guy like the president of our union, derek fisher, he's getting to the end of his career. he's got two years left on his current contract, and whether there's contracts beyond that too is yet to be seen. he's been putting strides, dug in the same way patrick has done in, but like d said, we can have all the negotiations in the world, and i said it in the meeting, ultimately it comes to power versus power, and as long as the players are prepared to stay in, ultimately, we get to where we need to go. >> thank you. >> thank you. >> good afternoon, i'm from florida, and my question is for mr. smith. i read that you got the players
before the lockout even started to buy into an insurance policy that would cover them for lack of a better word if the lockout went beyond what was originally anticipated. talk about that and what impact that had on the negotiations. >> no. [laughter] you know, i'm going to claim privilege on that one. >> all right. [laughter] >> why my question in >> later we'll talk. >> i'm an attorney in boston. i will not ask you about performance enhancing drug testing or the relationship between nba and the leagues, but i have a more narrow question. in our community, players and celebrities are leaders in philanthropic efforts, can you give us insight into their thinking and thinking of advisers in setting up their own
individual charitable foundations for every kind of issue that has somehow impacted their lives rather than often just partnering with well-established existing charities that also are, you know, addressing those needs because just a little background, i've seen over and over a lot of the foundations are utilized for marketing purposes and don't comply with the law, but players like ray allen where diabetes affected his family, he didn't set up his own foundation. he partnered with joslin foundation is being effective. others are to the cop trair. >> on the football side, i disagree with you. look at larry fitzgerald, and i think from the last time wee looked at it more players set up their own foundations than
partners with other ones. that's what i encourage. i want men to be businessmen in the business of football. that also means when you have you're own sense of worth or value or asset, go out and try to do something good on the basis of your own value and assets, so we've spent a lot of time in our office advising those folks on how to set up their own charities, and i think that's -- there's nothing wrong, have to give the caveat -- there's nothing wrong with partnering with well-established charities, but i love the fact that oc is building villages in his homeland of kenya. i mean, i kind of dig it, and he's the guy that can step out, especially in the new york community and demand that kind of assent from others to be involved. >> i agree with you. some are effective and others
are not getting good advice. >> you know, this is the range. i didn't answer the question about becoming an ago, but the question is how do you become a good one? you know? and we've been -- i've been very aggressive about our agents, and i'm sure if any of you know them, they whispered to you what they think of me at times. [laughter] but it seems to me that they have an obligation in the same way that we are lawyers to have, you know, a myopic few diewsh yarr relationship with those you work with. it comes down to how good a representative you want to be. to your question it seems to me if they're doing their job, telling these people there's all sorts of things they can do in their communities to make their
communities better, but the focus is not always how do i get into it, but what's the value once i do. >> let me respond and say i can't think of any bigger group of philanthropic athletes than exist in the nba. 90% of our players have foundation and set them up not under our direction or advice, but their agent. in some instances they misused foundations because they thought of it as a way to employ their family. we had to delude them of that notion, but what we have done at the unions from time to time is we have assessed our players a certain sum of money so that four years ago we shipped 10,000 tons of rice to kenya. bought the rice in taiwan, got the rice, and spared 120,000
kids a day for a year. you never knew that occurred. when cay -- katrina happened, we were the first on the ground, not fema. we sent 90 loads of food, clothing, and other items to new orleans and baton rouge. in the case of the world trade center, we stepped up giving $2.5 million to the victims of the world trade center. we decided it was what we wanted our players to be more involved, more charitable, and be in their respective communities. we encourage our players to do it. we have a litany of things like that that have occurred and more recently last summer and one player went to kenya with me when we deliver the rice. there was a kid who needed a heart operation in kenya, he paid $100,000 to have the kid
operated on. we don't talk about that. i have a list of things nba players historically do and don't go around announcing it. i think probably the problem also is that the need is so great, that you are afraid to crack the down because if you crack the door, every time we do something, we get innone dated with requests from people around the country who want us to make a contribution. we are not a charity in that way in that we're here to fund other charities and organizations. we have a limited pool of revenue, you know, that from time to time we're able to access, and so we have to be pretty spartan about how we use it. >> thank you. we are on the same page. we need them to be effective as possible, so thank you. >> good afternoon. i'm juan thomas, a lawyer from chicago. i wonder if you could react to the book $40 million slave,
referring to black athletes, and also do you have insight as to besides being rich, how do become an owner stray teg jibing -- strategically, what is that process like and what does it mean? i noticed over the years few african-americans have tried to get into owning with limited success. i'd love to hear what you think about that as well. >> well, i can reference michael jordan and job johnson, and when bob johnson decided to bid for the establishment of the charlotte bob cats it cost him like $300 million. that's part of the dilemma because you not only have to pay $300 million for the franchise, but have to have the capital to run it once you get it, and consequently you don't just buy in and it's up and running. i don't know when you look
around how many folks in the community can step up with those numbers. you probably have to put together groups, and if you got a group of people that you think are prepared to by an nba franchise or equipped to do it, give me a call. [laughter] give me a call, and i will see to it that you get the kind of introduction that you need. >> would you say that's important in terms of a group of lawyers or business people get together and have those kind of conversations? >> oh, i think it's definitely important. i think that's the problem. what we need to do is elevate our game and think at that level opposed to the problem with most of us and, you know, i've come out of oakland, and i'm fortunate and blessed to be sitting here, but when i refer back to a lot of my colleagues, folks i practiced law with back there, i know a lot of them are struggling because they rely upon the black community for
their business, and we're at the bottom, we're the most stressed group in the country, and our people need all kinds of legal services, but they don't have the where with all to pay for them. one hand feeds the other, so i don't know. i clearly think we need to have these discussions. clearly, there's enough ball ballplayers in the nba who could afford to buy a team, but one indicated they are barred from doing that. they don't ai low players to invest in franchises. maybe we have to change the thinking on that one. no, i think it's great, but listen, i said to the nba owners i'm dealing with that if they get the deal from us that they are preparing guaranteeing them $20 million-$30 million profit, then i want to own one of them franchises because the reality is, i mean, the value of franchises go through the roof. coupled with the fact there's a
guaranteed income coming in, that's something we should all be looking at. >> thanks for the question. >> hello, good afternoon, thank you for joining us and speaking. as a recent graduate from law school, it's inspirational to amp speaking. the question is about civic engagement. i'm wondering like you often see teachers unions and police unions affecting the political process, donating to campaigns, is there room for nfl or nba players association to affect the political process, make a political action committee, and can we see them advocate on capitol hill or state houses? is there room for that? >> look, i made no secret coming out of the box. we spent a lot of time on capitol hill. we spent a lot of time in state houses all over the country talking about the economic impact of the lockout, and i know billy has done the same
thing. why? everybody focuses on the limited pool of athletes who are going to be affected, but, you know, down the street at fedex there's nearly 8,000 workers alone who lose a job if there's no games. country wide upwards of 550,000 people who would be impacted for the lack of games just in the stadiums alone. you know, forget the bars, restaurants, you know, collateral services. you know, i think one of the things that came out of it was our young men got a different per specttive of -- perspective outside the bubble of football, and i think the way you build on that going forward and the way we will build on it going forward is now that we do have hopefully labor peace for a little while, take that same spirit or understanding that you can impact the ordinary lives of
every day people and move it into another direction, but i think they have to do it because it's the only way to take advantage of the gifts god has given you. >> it's also important because talking about role modeling, i think the professional athletes and entertainers in our community with the individuals with the greatest ability to impact the young folks, and so i think we need to be politically active, but the question is someone referenced the $40 million slave, the book written by bill, but part of the problem is you get a player who has a brief creeb in the nb -- career in the nba, struggle all his life to get there, now gets there and is looking at all kinds of marketing opportunities and he's going to make x-millions of dollars per year, and the people around them advise them they should not, but
we've been thinking about creating our own political action committee because we wrote a check to the teachers up in wisconsin who were having a problem, and so we're saying, well, we need our own political action committee to be more involved, and i know one in the audience who works for me was the one who told me what we needed to do, and so we've been working on that. >> thank you very much. >> hi, tracy jones from san diego. a question regarding your every day life when you are not negotiating contracts. there's a ten year deal now, what do you do between the ten year deal now, what do you do every day? [laughter] >> leap. sleep. [laughter] you know -- [laughter] being careful because i haven't talked to my wife, and i'm afraid of her.
[laughter] i think the challenge is always about, you know, whether there's stuff that you can set, you know, on a mountain top and try to climb to get it and whether that's enough to keep you going every day. i really vice president begin a whole heck of a lot of thought what happens in the next two years. we've begun mapping out where the players need to be over the next five to ten year span. that's what i'll work ongoing forward. i certainly had a lot of conversations with executive committee and, you know, the -- they want me to stay, i want to stay. we'll work it out, but all of the things that you've heard people talk about are things for us to work on in the next few years. how do we, you know, we supervise our agents in the national football league. how do they become -- how do we do a better job of making them better stewards of the men they
serve? how do we do a better job of making the game safer for our players? you know, when i got into the job, we treated concussions in a way that no one treats concussions anymore. i mean, we were able to do that in 15 months so, you know, the concussion issue is still there. that needs to get better. long term health care for retired players needs to be belter. there's plenty to do after i have a vacation, but that's the thought. >> okay. enjoy your vacation, thank you. [laughter] >> cooper from washington, asked the question about concussions and for the long term growth of the league, i'm sure, it may impact the growth going forward, but curious how you think it will. learning more about concussions and impacts on players, i imagine itlessens the length of player in their careers going forward. just your thoughts. >> you know, coming into the
job, i was stunned about where we were in the state of how concussions were manage and treated in the national football league, and obviously the trickle down effect is how it's treated in college and football, so we took a very aggressive, you know, position on what we thought needed to occur to make the game safer. . i think as medical studies improve, we'll continue to take very tough stands. one of the things i'll leave here and try to finalize negotiating is a medical accountability standard that for the first time we'll put in the collective bargaining agreement. the idea there was we had a medical director for about ten years on our side, but his role, his obligations, the league's obligations to him or her have never been defined in the cba, so i want us at a position where the document that governs our
business also is a document that gives us tools to address our safety, and, yes, there will be continuing issues. i got a report about the way in about a player in philadelphia who collapsed under the heat, so one of the things that i'm going to be jumping on real quick is what that situation is. you know that in this new deal, we e limb enated two-a-day practices for the first time in history. i will be dead hoppest -- [laughter] i wasn't complaining, but that was a huge deal for our players. that culture of hitting twice a day during training camps. that's gone. we limited the number of padded practices for the entire season. we've lengthened the term of the offseason, and what i tried to create was something called spring semester since teams are
done playing in january, the idea was to push the offseason to late april, early may so the young guys dropping out of school to play football can avail themselves of a semester in college. >> that's right. >> so -- [applause] thank you. [applause] there's stuff to do. >> i'm omar taylor, a third year law student at southern university. >> go back and do third year again. [laughter] >> begin you are representatives and advocates for the rights of players and discussed ideas of revenue sharing and profit sharing, my question is what are your thoughts on revenue structure at the collegiate level begin they make millions of dollars in the institutions,
but get nothing in return. [laughter] >> we had that discussed many times in our office, and i know as it relates to our negotiations, one of the things that the ncaa is pushing for in conjunction with the commissioner is they want to extend the age limit and make sure the players stay in college at least through their junior year before they can come to the nba. in 2005 when we had pretty much worked out our agreement with the exception of the pending issue about age in order to bring closure, i agreed to give up a year so it meant that the kids couldn't come from high school. you had to spend at least a year at of high school and then come to the nba. from my perspective, you're right. there's a lot of money jeep rated for the ledge -- colleges by the kids who play.
we found only 17% of the kids who who go to division i schools on scholarship actually graduate. that's for kids who stay in. going forward, there should be some process put in place, some structure enabling athleted to get paid. call it how it is. the ncaa negotiates a deals that pays them something like $9 billion over 11 years for march madness, why not have players participate in it? why is a college coach paid $2 million a year, and you get a meal ticket, and he determines what shoes you wear because he has a contract with nike or something. on that team, you wear that shoe. you do all this stuff to promote and enhance his quality of life, and i think the players should be impacted like wise. these universities benefit tremendously from these kids.
maybe write something to the historically black colleges. [applause] >> you know, we're at the end of the program, i'm going to just take one more question. >> switching gears, i'm robert louis, a bankruptcy attorney. >> okay. >> for the first time in my lifetime, there was a major league baseball team involved in file bankruptcy. how would that affect the players union on both sides, football and basketball, if one of these nba teams or if one of these nfl teams sought bankruptcy? >> well, i don't know filing bankruptcy. we had the case of the new orleans hornets and the owner was having problems there. the league stepped in and purchased the team, and our negotiations from time to time, the issue of contraction has come up, and we've said, well, you know, if you think you have to contract, then so be it. what it does is obviously impact
the number of jobs, but they are countervailing arguments is someone says, well, if you reduce the number of teams, you enhance the quality of play because the ballplayers and other people are infused into the teams that might be struggling. i don't see any nba teams currently on the horizon on the verge of bankruptcy. i think in the case of the sacramento kings there were reputations made about how they were having difficulties, but keep in mind, eight years ago they were making money because of the quality of players they have, and that's the way it works. it goes in cycles. if you have a product to put on the floor, people will come and see it, but if the product is diminished because of incompetent management and whatever, then folks stay away. i don't see anything happening with regard to bankruptcy at least on the horizon. i'm not concerned about